Post Foods plans to close Modesto plant

jnsbranti@modbee.comMarch 21, 2013 

— Post Foods has "conditionally approved" plans to close its south Modesto manufacturing plant, lay off 140 workers and pull its cereal manufacturing out of California.

Well-paid union workers have been cooking up breakfast staples such as Grape-Nuts and Raisin Bran in the massive Whitmore Avenue facility since 1976.

But Post's corporate ownership has shifted repeatedly over the decades, and last year Post Holdings took over as an independent, publicly traded company.

Post revealed Thursday that its new board of directors voted Tuesday to close the Modesto plant "conditioned upon discussions with the union."

In a brief statement, Post said the move would "increase efficiency" and better enable the company "to compete in today's environment."

"We are committed to addressing our excess capacity," Post President Terence Block said.

Block, who was hired last year, gets a $500,000 salary plus up to $500,000 in annual bonuses and stock options.

Post's Modesto workers earn far less.

The cereal plant's work force is dominated by older employees, many of whom have been there 20 years or more, according to Bill Bassitt, Stanislaus Economic Development & Workforce Alliance.

On average, those union jobs pay $18 to $22 per hour, Bassitt said.

"That's a good wage for our plants here," said Bassitt, noting that Post workers receive health benefits. He predicted it will be "very challenging" for them to find jobs with comparable pay in this county.

Post said it would consult with Teamsters Local 386 "to ensure that employees' interests are represented" before it makes a final decision about whether to close the plant.

That decision is expected by the end of April.

Jeff Berdion, Local 386's secretary-treasurer, said the Teamsters "remain hopeful" the plant can be saved.

"The union is working and will continue to work with the company to do what we can to protect these important jobs," Berdion said.

The 282,000-square-foot, six-story plant on nearly 80 acres is important to Stanislaus County's tax coffers. Its property tax bill last year was nearly $525,000, making it among the county's top taxpayers.

Stanislaus assessors valued the plant's worth at nearly $43.3 million last year.

Over the decades, the plant has manufactured products ranging from Kool-Aid and Tang to Banana Nut Crunch and Honey Comb. The building and the Post brand have been owned by General Foods, Kraft, Philip Morris and Ralcorp Holdings.

Besides using the building for cooking, baking and various extrusion manufacturing techniques, it has rail access for grain delivery and storage.

In the mid-1990s, more than 225 people were employed there.

But Americans were eating a lot more cereal then, and Bassitt said only about half the Modesto plant is being used now.

"The world's supply of Grape Nuts" still is made there, Bassitt said. That high-fiber cereal is most popular in Florida, however, and "you can't get much farther away from Modesto than that."

If it closes the Modesto plant, Post said it would shift cereal production to one of its other manufacturing facilities. Its Battle Creek, Mich., plant is six times larger than the one in Modesto, and the company also makes cereal in Jonesboro, Ark., and Niagara Falls, Ontario.

Post recently negotiated collective bargaining agreements with workers in Niagara Falls and Battle Creek, but its Teamsters contract in Modesto expires in May.

Post previously notified its shareholders that if a contract dispute caused a work stoppage in Modesto, it would mitigate disruptions by using its other plants to make cereals.

The company's recently issued 2012 annual report notes environmental concerns about the Modesto facility.

"The Environmental Protection Agency and related environmental governmental agencies have issued notice that Post may be liable for improper air emissions" in Modesto, the company said. Post, however, stated that it didn't expect "the ultimate liability arising from such environmental matters" to have a material financial impact on the company.

If Post closes in Modesto, Bassitt predicted it would be hard to find another company to fill that space: "I don't know what the potential repurposing of that facility would be."

Bee staff writer J.N. Sbranti can be reached at jnsbranti@modbee.com or (209) 578-2196.

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